WTO SERVICES NEGOTIATIONS - FEBRUARY 7-25, 2005

UNCLAS SECTION 01 OF 04 GENEVA 001238

SIPDIS

SENSITIVE

PASS USTR FOR BLISS/HOOKER
DOC FOR SHAGIGH, LMARRINACCIO, EALFORD, RBOLL
DOT FOR DMARVICH, SHATLEY
DOE FOR HASAMOAH

E.O. 12958: N/A
TAGS: ETRD ECON WTO
SUBJECT: WTO SERVICES NEGOTIATIONS - FEBRUARY 7-25, 2005

This cable is Sensitive but Unclassified. Please handle
accordingly. Not for internet retransmission.


1. (U) Summary: The WTO services three week "mega cluster"
took place in Geneva, February 7- 25, 2005. The meetings focused
on preparations for revised offers indicatively due May 2005 with
many "friends" groups presenting sector-specific proposals aimed
at eliciting market access commitments in these areas. Chairman
Jara repeated the same concerns he raised at the TNC about the
poor state of play for services negotiations. Jara expressed
concern that much work had to be done between now and Hong Kong.
The U.S. and other developed countries encouraged members to
submit initial offers and stressed the importance of meeting the
May 2005 deadline for submission of revised offers. The U.S. met
bilaterally with 34 Members (see para 13) and participated in
multiple friends groups (see para 14) to advance market access
negotiations. Members doggedly stressed the importance of Mode 4
(movement of natural persons) and emphasized that without
additional Mode 4 market access from the U.S., the negotiations
will not move forward. A half-day informal session devoted to
Mode 4. The Council for Trade in Services' (CTS) MFN Exemption
Review continued. The U.S. tabled a well-received proposal on
horizontal transparency disciplines in the Working Party on
Domestic Regulations. Other working parties, including Working
Party on GATS Rules, Committee on Specific Commitments, and the
Committee on Trade in Financial Services also met. The Special
Session Chair proposed benchmarks to assess progress in the
services negotiations and considered for the December WTO Hong
Kong Ministerial. The next cluster will not convene until late
June to allow time to prepare revise offers by the May deadline.
End Summary.

COUNCIL FOR TRADE IN SERVICES SPECIAL SESSION (CTSSS)


2. (SBU) Assessment: Members responded to the WTO
Secretariat's presentation on services assessment based on their

SIPDIS
recent trade report. The report underscored the benefits of
liberalizing infrastructure services, such as transportation,
telecommunications and financial services. Developing countries
such as Pakistan, Uganda, Senegal and Nigeria noted the benefits
they have reaped from telecommunications liberalization.
Responding to some members, including South Africa and the
Philippines', continued insistence that they need a methodology
for assessment in order to prepare an initial offer, the Chair
reminded members that much assessment work has to be done on a
case-by-case basis and that this has been done. Hong Kong, the
EC and others urged members to apply what they have learned about
the benefits of services liberalization to develop initial
offers.


3. (SBU) State of Play: Chairman Jara repeated the same
concerns he raised at the TNC about the poor state of play for
services negotiations. He expressed concern that much work had
to be done between now and Hong Kong. Namely, he said more
initial offers had to be tabled; May revised offers had to
demonstrate improvements; the importance of services trade
commitments must be raised at all levels with Ministers,
including mini-Ministerials; and, that some work had to be done
on how to organize, including parallel work on rules and domestic
regulations. Indonesia, Barbados and Uganda announced that they
would be tabling offers in the coming days. (Comment: Shortly
after the cluster, Guyana and Grenada also tabled initial offers.
End Comment). The Chairman also recognized that while rules work
required further examination, proposals tabled on domestic
regulations revealed that a package could emerge that would yield
some promising results by Hong Kong. He said that his plan for
the next cluster was to hold a session for LDCs to enable them to
voice their interests and discuss how to enhance their
participation in the request/offer process. He applauded the
informal Mode 4 discussions and he may decide to hold further
Mode 4 consultations as well as consultations on other issues,
such as cross border supply - Mode 1. The Chair, noting several
Members' interest in informal intersessional meetings to advance
Domestic Regulation work, coordinate inputs from friends groups,
and move market access proposals, suspended meetings until April
27, rather than closing the Special Session. Ambassadors for the
U.S., India, Hong Kong, EC, Mexico, Uganda, Zambia, Peru, and
Singapore made strong statements of support for the negotiations.


4. (SBU) Chairman Jara informally introduced the Secretariat's
thinking on how to examine offers. The Secretariat presentation
examined offers in the context of Uruguay Round commitments,
highlighting the developed countries' already extensive
commitments compared to developing countries very limited
commitments. The paper then continued to examine where Members
should be with regard to existing liberalization and possible
thinking on a benchmark to measure improvements.


5. (SBU) Several negotiating proposals and friends group
statements were tabled and preliminarily discussed in the Special
Session. On telecommunications, the EC tabled a paper without
notice to Telecom Friends, which appeared to undermine the U.S.
position to preserve coverage of value added telecommunications
services. Consequently, the U.S. introduced its own paper. Many
other Friends groups, including Express Delivery Friends,
Financial Services Friends, and Environmental Friends, introduced
and/or discussed negotiating proposals. Some developing
countries stressed the need for construction services
commitments.


6. (SBU) Mode 4 (Temporary Entry): A special informal session
of the Council for Trade in Services was devoted to discussion of
Mode 4 issues. The Mode 4 discussions took a very polarizing
tone, as Mode 4 demandeurs began to express their requests in the
form of an ultimatum to developed countries, particularly to the
U.S. The EC tabled a paper on Mode 4 common categories (co-
sponsored by Canada, Bulgaria and Romania) and India tabled a
competing paper (co-sponsored by Argentina, Chile, Colombia,
Mexico, Peru, Philippines, Pakistan, Thailand and Uruguay) that
went beyond categorization to stress specific market access
elements. Chile, Colombia and Peru argued that while
transparency for Mode 4, including common categories and
definitions, was useful, market access was of higher importance.
Indonesia, South Africa, Mexico, Brazil and China also stressed
the importance of mode 4 for development. The EC ventured to say
that the GATS was not limited by a particular skill level and
that it shared the view that transparency was just a stepping
stone to more mode 4 market access commitments. Developing
countries focused on access for contract service providers and
independent professionals (both without a wage parity
requirement). Interventions from Australia, New Zealand and
Korea cautioned Members that domestic immigration regimes had to
be taken into account. Switzerland stressed the need for wage
parity. The U.S. intervened to support the basic principles of
transparency and uniformity in scheduling of Mode 4 commitments,
but did not directly address market access issues.


7. (SBU) Least Developed Countries, including Uganda's
Ambassador, stressed their need for commitments for unskilled
workers. Uganda's Ambassador also said that developed countries'
visa process was burdensome and too expensive and suggested that
developed countries' return visa application fees when visas are
denied. The New Zealand responded that unskilled and low-skilled
labor was not within the GATS scope. Various developing
countries stated that commitments in these areas would be the
appropriate response to the development aspect of the
negotiations.

MFN REVIEW


8. (SBU) The MFN exemption review mandate requires examination
of whether the circumstances still exist for maintenance of each
exemption and a determination of the date for the next review.
Hong Kong China, China, Korea, Japan, Mexico and Chinese Taipei
demanded that all MFN exemptions be eliminated and complained
that not all of their questions from the last cluster had been
addressed. These members also urged that the review continue to
the next cluster. (Comment: Some of these proponents are
targeting U.S. maritime related exemptions and seek to engage in
protracted questions. End Comment.) The Chair decided to leave
the items on the agenda for the next meeting and hold
consultations on the question of outstanding responses and the
last part of the mandate to determine the date for the next
review.

SUBSIDIARY BODIES


9. (SBU) Working Party on Domestic Regulation (WPDR): Members
further discussed Colombia's paper concerning alleged burdensome
visa procedures. This paper is particularly controversial
because it asserts that countries' immigration regimes, i.e.
visas, are within the GATS scope and subject to GATS disciplines.
Some developed countries, such as the U.S., EC, and Australia
believe that visas are not included in the GATS scope. Mexico
gave a detailed power point presentation on its domestic
experience in administering general technical standards
disciplines. Also, the U.S. and two groups of developing
countries introduced papers and entertained preliminary
reactions. The U.S. paper proposed horizontal regulatory
disciplines on transparency; the India, Chile, Mexico and
Thailand paper addressed horizontal disciplines on qualification
requirements and procedures; and, the Philippines, Colombia,
Brazil, Dominican Republic and Peru paper introduced a
comprehensive proposal for disciplines. The U.S. transparency
proposal was well received and many delegations raised
constructive questions including Brazil, India, and Colombia.
(Comment: Horizontal transparency disciplines are a key U.S.
objective for the DDA. The U.S. proposal covers all sectors and
modes of supply, with the exception of specific concerns about
entry authorizations (visas). End Comment).


10. (SBU) Working Party on GATS Rules (WPGR): The WPGR
commenced with a constructive discussion of the U.S. paper on an
information exchange on subsidies by sector. The U.S. stressed
that the purpose of the paper was to provide some focus to the
subsidies discussion rather than seek consensus on approach.
While delegations had different views on where to begin the
information exchange, most delegations welcomed the U.S. idea to
focus on a few sectors at a time. Members continued to raise
concerns with an EC government procurement proposal that suggests
that market access and national treatment disciplines apply to
GATS Art. XIII (government procurement). India, Malaysia and
others argued that Art. XIII explicitly excludes market access
and national treatment and if any area were covered, it would be
transparency. However, India and Egypt suggested that since the
Singapore Issue of Transparency in Government Procurement was
"dropped" from the overall DDA, it seemed the same was the case
for the Services mandate. The U.S. noted that it did not share
India and Egypt's interpretation that transparency had dropped
from the Services procurement mandate. Delegations further
discussed an emergency safeguard mechanism (ESM),though no
resolution surfaced. ESM opponents assert that there is
insufficient data in services to make the necessary causal link
to injury. Hong Kong China drew a comparison between Economic
Needs Tests (ENTs) and ESMs and suggested that Members were being
hypocritical in their ESM opposition. The U.S. disagreed with
Hong Kong China that all ENTs served as ESMs and said that it was
up to ESM proponents (ASEANS minus Singapore) to demonstrate how
a multilateral emergency mechanism could be employed and
enforced.


11. (SBU) Committee on Specific Commitments (CSC): Under the
standing item on "scheduling issues," the Committee continued
discussing Hong Kong China's and Chinese Taipei's general
questions on ENTs and other areas. In informal mode, the
Committee also discussed how to proceed on Brazil's request to
discuss "technical" questions on offers in a multilateral forum.
The EC suggested that it would hold an open-ended bilateral with
all interested Members to answer all questions on their offer.
The U.S. reiterated that it would continue to address questions
on its offer bilaterally but that it was open to answering
strictly "technical" questions about its offer in the CSC in
informal mode. This way, developing countries with capacity
constraints could come to the regularly scheduled CSC and take
advantage of hearing responses to "technical" questions,
determined as such by the U.S., in informal mode without
frustrating the confidential nature of the request/offer process.
The Chair will continue consulting on this matter.


12. (SBU) Council on Trade in Financial Services (CTFS): The
CTFS highlight was the Friends of Financial Services presentation
of the liberalization statement. The friends signaled that co-
sponsors would be sought for the version to be tabled in the
Special Session. Morocco, Antigua and Barbuda, and others spoke
in general support of the concepts but stressed consideration of
developing countries' special regulatory needs. The CTFS also
noted that Brazil, Jamaica and the Philippines have not yet to
accept the Fifth Protocol. Jamaica and Brazil explained that the
delay was due to their domestic processes.

BILATERALS AND PLURILATERALS


13. (SBU) Bilaterals: The U.S. participated in over 34
bilaterals, meeting with all U.S. priority markets, except
Venezuela. Bilateral meetings included: Argentina, Australia,
China, Egypt, India, Israel, Nigeria, Uruguay, Tunisia, Pakistan,
Sri Lanka, EC, Brazil, Korea, Japan, the African Group and LDCs,
Kenya, South Africa, Switzerland, Norway, Malaysia, Indonesia,
Philippines, New Zealand, Canada, Hong Kong, Turkey, Jamaica,
Thailand, Mexico, and a Group of Gulf Countries (Oman, Bahrain,
Kuwait, and UAE). Bilateral engagement had a higher level of
focus on specific market access interests. In all bilaterals,
the U.S. focused its market access request on the following key
sectors: energy services, financial services, telecommunications,
express delivery, environmental services, computer-related
services and audiovisual services. The most disappointing
bilateral was with the EC, which accused the U.S. of backtracking
from its existing commitments and attacked the U.S. for not
including Mode 4 in its initial offer. Hong Kong China expressed
its interest in maritime and the elimination of MFN exemptions.
South Africa and the Philippines still could not reassure the
U.S. that they would soon table their much-sought initial offers,
though they indicated that they had already prepared the offers.


14. (SBU) Friends Groups: The U.S. participated in
approximately 10 friends group meetings. Friends group
engagement was more refined and focused, responding to
suggestions that the Friends groups should mobilize to advance
the negotiations. Under U.S. leadership, Financial Services
friends (Canada, EC, Japan, Switzerland, Singapore, Norway,
Australia, Bahrain, Panama, Oman and Chinese Taipei) succeeded in
presenting a joint statement to promote the sector. Similar
statements on logistics, legal, computer and related, telecom,
postal/courier, and environmental services were also tabled. The
U.S. also tabled a telecom classification proposal to counter an
EC telecom classification paper. In addition, the U.S., Canada
and Japan co-sponsored an Air Annex statement to counter an
Australia, EC, Chile, New Zealand, Norway and Switzerland
proposal that invited Members to schedule ground handling
services commitments, which is outside the GATS' scope. Brazil
and South Africa supported the U.S. position against the
inclusion of ground handling services. Friends groups also
organized seminars promoting liberalization in financial,
maritime, and education services.


15. (SBU) LDC/Africa Group meeting: The U.S. met jointly with
the African Group and LDCs. The U.S. highlighted the benefits of
liberalizing infrastructure services, such as telecommunications,
financial services, and energy services, and linked services
liberalization to countries' various development goals. Drawing
upon available data on trends in developing countries, the U.S.
proposed ideas for requests and offers. Nigeria indicated that
it was preparing an initial offer, which would include energy
services and that it would like more technical assistance.
Rwanda asked how the U.S. intended to address Mode 4,
underscoring that many LDCs do not have resources to request
anything beyond Mode 4. The U.S. responded by highlighting our
current Mode 4 commitments, which are largely unmatched by most
other countries and reminded the group of our political
sensitivities. The U.S. also suggested that our transparency
disciplines proposal attempted to respond to some developing
country concerns in that it covers all modes of supply. The U.S.
highlighted technical assistance work with the International
Trade Centre, the WTO Secretariat and bilateral programs.


16. (SBU) APEC Caucus: Hong Kong China hosted an APEC Caucus
meeting to discuss how to foster the GATS negotiations. Various
members suggested that the Caucus do more in the area of
assessment and transparency and Chile prompted Thailand to
suggest work on licensing and qualification requirements. It
was also suggested that that the chair, Hong Kong, pursue APEC
statements that maintain the importance of services negotiations
in the Round.


17. (SBU) Quad-Jara meeting: Chairman Jara indicated that he
had mixed views on the form of the "first approximation", though
he believes that it will be important for Members to assess
revised offers' for Hong Kong. The EC fears that Jara's talk of
broad benchmarks might encourage Members to hold tabling their
revised offers in May until a consensus is reached on a general
benchmark. The U.S. shares the EC's concern, but supports Jara
undertaking consultations in small groups to avoid services
getting too behind the curve. Deily